Tokyo retreats from highs; Shanghai extends losses

V.Phani Kumar

HONG KONG (MarketWatch) -- Asian markets were mixed Friday, with Japanese stocks retreating from early highs as worries about global credit markets weighed down financials such as Mitsubishi UFJ Financial Group, while Australian stocks were lifted by resource issues such as BHP Billiton on high crude-oil and metal prices.

Shanghai-listed stocks extended losses into the third session, and pulled down China-related shares in Hong Kong trading. Mumbai shares rose sharply as investors looked for bargains in beaten-down stocks such as ICICI Bank and market heavyweight Reliance Industries.

"The markets are quite fragile. After the meltdown yesterday, people are very cautious and keen to sell into any strength," said Y.K. Chan, strategist at Phillip Capital Management in Hong Kong.

The Nikkei 225 Average ended the session 1.5% lower at 12,241.60, its lowest finish since August 2005. Earlier in the day, the benchmark average climbed as high as 12,582.57, but couldn't sustain those gains. The broader Topix index lost 1.9% at 1,193.23, retreating from the day's high at 1,223.96.

In a note to clients, DBS Group Research reduced Japan's GDP growth estimated to 1.5% from 2.1% earlier, and said the country was likely to "skirt recession this year."

DBS added it has pushed back its "expectations for interest rate normalization (in Japan). We don't expect another rate hike until 2009."

China's Shanghai Composite, which Thursday dropped below the 4,000-point mark for the first time in 2008, briefly regained the psychologically important level Friday, but couldn't hold on to the gains. It finished the day's roller-coaster ride 0.2% lower at 3,962.67, taking losses into the third straight session amid lingering worries the country's central bank will further tighten monetary policy to control inflation.

In Hong Kong, the Hang Seng Index finished down 0.3% at 22,237.11, while the Hang Seng China Enterprises Index lost 1.7% at 11,891.42, tracking losses in Shanghai.

Regional detail

In Tokyo, financials were volatile before ending lower on worries about the health of the global financial markets. Shares of Mitsubishi UFJ (8306)
MTU, +1.59%
fell 1.8%, while Mizuho Financial Group (8411)
MFG, +0.00%
dropped 1.3%.

Exporters were also volatile, as the U.S. dollar dropped against the yen in the afternoon. Shares of Honda Motor Co.
HMC, +0.66%
(7267) sank 4.4%, while Sony Corp. (6758)
SNE, +1.08%
dropped 2.3%, after rising more than 4% earlier in the day.

The U.S. dollar was volatile in the currency markets, and was quoted at 100.39 yen in late Asian trading, after moving between 99.84 yen and 101.04 yen during the session. In European trading Thursday, the dollar broke the 100 yen mark to touch 99.75 yen, its lowest level against the yen since November 1995.

In Hong Kong, shares of China Petroleum & Chemical Corp., or Sinopec
SNP, -1.21%
(386), tumbled 4.6%, on top of a 8.4% slump Thursday, because of worries rising crude costs and controls on fuel prices could hurt the Chinese refiner's profits. The decline came despite the company's denial of a media report that it is expected to post losses in the first and second quarters.

Shares of Midwest Corp. (MIS) shot 30.1% higher to A$5.43 ($5.05) in Sydney trading, following an unsolicited takeover bid from Beijing-based Sinosteel Corp., as the Chinese state-owned steelmaker sought to shore up strategic supplies of key inputs. Sinosteel said in a statement it was offering A$5.60 in cash for each Midwest share, representing a 35% premium to Midwest's closing price Thursday.

In other news, China's investment in factories and land continued at a torrid pace in the first two months of the year, with few signs of a slowdown despite the worst snowstorms in half a century hitting key industrial regions. Data released Friday showed investment into fixed assets in urban areas climbed 24.3% to 812.1 billion yuan ($115 billion).

Elsewhere in the region, India's inflation, as measured by wholesale prices, rose to 5.11% in the week ended March 1 from a year-ago, compared with 5.02% a week earlier.

In central bank moves, the Japanese government is reportedly considering changes to a law that would enable current Bank of Japan Governor Toshihiko Fukui to remain on the job after his five-year term expires Wednesday, until a new leader is appointed. The emergency measure is designed to avoid a leadership vacuum at the central bank of the world's second-largest economy.

Crude oil for December delivery fell as much as 33 cents to $110 a barrel in electronic trading. The contract ended up 41 cents at $110.33 a barrel Thursday in the regular session on the New York Mercantile Exchange. It hit a record $111 a barrel earlier in the session.

On Wall Street, the Dow Jones Industrial Average
DJIA, +0.31%
recovered from a 235-point drop to end up 35 points at 12,145. The S&P 500 index
SPX, +0.35%
gained 6 points to end at 1,315, while the Nasdaq Composite
$COMPX
rose 19 points to 2,263.

Intraday Data provided by SIX Financial Information and subject to terms of use.
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